Senate passes Securities law

THE SENATE on Thursday passed a bill to amend the Securities Act as the Government moves to enhance the legal and regulatory framework for Retail Repurchase Agreements (repos) in Jamaica.

The decision forms part of the structural benchmark set out in the country's extended fund facility with the International Monetary Fund (IMF) and is to take effect by December 31.

Justice Minister Senator Mark Golding, who piloted the bill, said the focus of the amended law is to provide additional protection for the interests of repurchase clients in the financial sector, in the event of a dealer's insolvency or bankruptcy, so as to mitigate the risks associated with retail repo products.

Senator Golding explained that retail repurchase agreements had become a widespread funding product for securities dealers in Jamaica and that this poses particular risks to the financial system.

"The Government has decided to address this by new measures, creating a robust legal and regulatory framework that is designed to mitigate those risks, so as to protect the investing public and the entire financial system in the event of any major financial shocks to the system," he explained.

NEW ADDITION

A new Section 36A has been introduced in the law to deal with assets associated with repurchase agreements. Provisions in this section prohibit a dealer from entering into or conducting transactions involving repurchase agreements unless they are undertaken in accordance with the provisions of the act and regulations made under the statute.

It also includes a provision which makes it an offence for a dealer to enter into or conduct transactions involving repurchase agreements in contravention of the act and any regulations made under it.

Opposition Senator Nigel Clarke supported the bill saying the securities dealer sector had depended on a model that "finances the Government long-term, using short-term funds and, in many cases, retail funds", adding that the securities dealer took several risks in the process.

He said the securities dealer was exposed to the potential of capital losses which could undermine the entire financial system.

He commended the Jamaica Securities Dealers' Association, the Government and the IMF for coming up with a solution that was more practical for Jamaica.